Wall Street plunges as weak economic, earnings stir concerns about recession
Stocks skidded in early trading Tuesday after weak economic news and a disappointing quarterly report from Citigroup Inc. stirred renewed concerns of recession.
The Commerce Department report sent another bad signal on the economy, registering a 0.4 percent drop while the November figure was revised lower.
The result suggests that a wary consumer may no longer be stimulating the economy, although it was in line with the Thomson/IFR forecast. The report followed disappointing sales figures from several major retailers last week.
Federal Reserve Chairman Ben Bernanke has dropped strong hints that a rate reduction is on the way. The Fed's monetary policy committee's next meeting is Jan. 29-30. The worrisome fall in retail sales, which also puts pressure on the dollar, builds a case for the argument that the cut will be at least 0.50 percentage point.
Concerns about a weakening economy also were highlighted in the latest earnings results. Embattled bank Citigroup announced a hefty $18.1 billion write-down for bad mortgage assets early Tuesday and slashed its dividend.
The news of Citigroup's drastic efforts to shore up its balance sheet had been widely expected, but it still was a forceful reminder of the serious problems that bad lending practices have created for financial services firms. The stock was volatile in preopening trade and last was down 53 cents, or 1.75 percent, at $28.55.
Citigroup, which lost $9.83 billion in the fourth quarter, also announced a massive $12.5 billion capital injection. Hope that struggling financial firms will bolster their finances also was stirred by news that Merrill Lynch & Co. Inc. agreed that three foreign investment funds will invest $6.6 billion in the Wall Street firm.
In early trading, the Dow Jones industrial average fell 100.48, or 0.79 percent, to 12,677.67.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 17.01, or 1.20 percent, to 1,399.24, and the Nasdaq composite index fell 29.41, or 1.19 percent, to 2,448.89.
Declining issues outnumbered advancers by about 6 to 1 on the New York Stock Exchange, where volume came to 115.9 million shares.
Bond price rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.73 percent from 3.77 percent late Monday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell $2.34 to $91.86 per barrel in premarket electronic trading on the New York Mercantile Exchange.
Since the start of the year, an indecisive stock market has vacillated between rallies and selloffs, as market players try to discern whether the economy has begun to shrink or is just slightly slowed by troubles in the credit and housing markets.
Also among Tuesday's reports, the New York Federal Reserve's Empire State survey of regional manufacturing showed a drop to 9.03 this month from 9.80 in December, alongside declines in the employment and new orders subindices.
But there was some relief about inflation. Producer prices fell 0.1 percent, according to the Labor Department. The result was smaller than the 0.2 percent drop expected by economists, but all declines in price pressure are generally good news. Excluding food and energy, producer prices gained 0.2 percent, matching expectations.
The Russell 2000 index of smaller companies fell 8.29, or 1.16 percent, to 704.19.
Overseas, Japan's Nikkei stock average fell 0.98 percent. In afternoon trading, Britain's FTSE 100 lost 1.85 percent, Germany's DAX index fell 1.23 percent, and France's CAC-40 fell 1.75 percent.